Opinion
C.A. KC-2010-1106
02-28-2012
SCHOOL COMMITTEE OF THE TOWN OF WEST WARWICK, ET AL. v. EDWARD A. GIROUX, TOWN OF WEST WARWICK, ET AL.
DECISION
RUBINE , J. The plaintiffs are the School Committee of the Town of West Warwick, and its duly elected members, (hereafter "the School Committee"). The defendant is the Town of West Warwick and its duly elected town Council members (hereafter "the Town"). In 1988, in connection with the settlement of a Caruolo action then pending (PC-2008-2836), the Town and the School Committee agreed that the Town would directly pay certain creditors of the School Committee. In exchange, the School Committee agreed to dismiss the 2008 Caruolo action, and would not consider the amounts that the Town paid directly to vendors as part of the maintenance of effort in succeeding fiscal years.
For purposes of this decision, reference to the "Caruolo Act" refers to the obligation set forth in G.L. § 16-2-21.4 that municipalities must appropriate sufficient funds to ensure that a community can comply with the "basic educational plan" together with honoring all contractual commitments made by the School Committee. Reference to "maintenance of effort" refers to the obligation of the municipality under G.L. § 16-7-23 that the appropriation shall not be less than that for the previous fiscal year.
Although this agreement was neither set forth on the record nor reduced to writing, the agreement was memorialized in mutual resolutions promulgated by both parties. It was alleged in the 2008 Caruolo action, that for fiscal year 2008, the Town had failed to appropriate sufficient funds for fiscal year 2009 (school year 2008-2009), to meet its obligations under the basic education plan. In the instant action, as a result of the settlement of the 2008 Caruolo action, for fiscal year 2008 the Town excluded from its annual appropriation, money representing the Town's direct payments it made to vendors in 2008. Therefore, the School Committee alleges that the Town failed to appropriate sufficient money for fiscal year 2009 to match, at a minimum, the appropriation for the previous fiscal year (2008) as required by G.L. § 16-7-23. The School Committee's position is, notwithstanding the settlement agreement, which it alleges is unenforceable, thus the Town was obligated by state law to recognize in its 2009 appropriation the money the Town had paid directly to vendors in 2008, for purposes of the maintenance of effort requirements of state law.
The Town has filed a Motion to Dismiss the Amended Complaint on the basis that the Amended Complaint fails to state a claim upon which relief can be granted, pursuant to R.C.P. 12(b)(6). The School Committee has moved for summary judgment as to Count One of its Amended Complaint (relating to the 2009 fiscal year) and supports that motion with the affidavit of Michael Petrarca, the Director of Administration and Finance for the West Warwick School Department. The School Committee alleges that there are no genuine issues of material fact and that the plaintiff is entitled to judgment as a matter of law with respect to declaratory and mandamus relief. The Town opposes the Motion for Summary Judgment. The Town has not contested the School Committee's statement of material fact as gleaned from the affidavit of Michael Petrarca and related discovery.
The Amended Complaint contains additional counts seeking similar relief for each fiscal year from 2010 to the present.
I
Facts
The Court finds that the undisputed facts material to the resolution of the School Committee's Motion are as follows:
For fiscal year 2008, the Town's original appropriation to the School Committee to support public education was $ 28,829,138. As part of the settlement of the litigation brought by the School Committee under the Caruolo Act (G. L. § 16-7-24) for fiscal year 2008 (PC-2008-2836) the Town and the School Committee reached an agreement that the Town would directly pay three creditors of the school committee and that the total amount the Town directly paid to those vendors ($1,162,343) would not be considered for purposes of computing the fiscal year 2009 appropriation which, together with the original appropriation from the Town, gave rise to a total appropriation for fiscal year 2008 of $29,991,481. Per the settlement agreement, the Town agreed to pay the three creditors as identified in Footnote 3, based on the condition that such payments would not be included in the total appropriation for 2008 that would be considered for maintenance of effort purposes in 2009, and subsequent fiscal years. The Town wishes to establish the maintenance of effort for 2008 to be the original appropriation without the addition of the direct payments to vendors.
Specifically the School Committee owed $251,183 to First Student, Inc. for busing services provided during fiscal year 2008. The Town paid that sum directly to the vendor, rather than depositing such amount in the account of the School Department. The School Committee owed $475,000, and the Town paid directly to the West Warwick pension fund that amount for pension payments due under collective-bargaining agreements for School Department employees preferred creditors. Finally, the Town paid directly to Warwick Career Center, Inc. $436,160 for vocational services provided to West Warwick students during the 2007 - 2008 school year.
The School Committee on the other hand believes the direct payments should be considered part of the 2008 appropriation (2008, being the reference year for fiscal year 2009; and that any settlement agreement excluding those direct payments from the maintenance of effort base should be unenforceable as an agreement that runs contrary to state statutory law). In order for a municipality to comply with maintenance of effort pursuant to G.L. § 16-7-23, the amount appropriated for fiscal year 2009 must not be less than that amount appropriated in the previous fiscal year. This dispute focuses in on Count One and the difference between the parties' positions with respect to the amount to be considered as the fiscal year 2008 appropriation. The position of the School Committee is that the fiscal year 2009 appropriation must be not less than the $21,991,481. The Town, however, made its 2009 appropriation based on what it then believed to be an enforceable settlement agreement ($28,839,138) which would exclude the amounts the Town directly paid to vendors in fiscal year 2008. The difference of $1,162,343 represents the amount that the School Committee believes the Town is obligated to pay for the shortfall in the fiscal year 2009 appropriation.
The Town believes the School Committee must honor the settlement reached in 2008, and that its appropriation of $28,839,138 complies with the minimum appropriation that it is required to make for fiscal year 2009; and that the same amount should be considered for future maintenance of effort purposes under G.L. § 16-7-23. The Town believes it owes nothing additional for fiscal year 2009, since its fiscal year 2009 appropriation was not less than the fiscal year 2008 appropriation (when the 2008 appropriation is considered, by excluding from the 2008 figure the direct payments the Town made to vendors in 2008). In other words, the Town believes that the $28,829,138 appropriated for the fiscal year 2009 budget cycle, was sufficient to comply with that year's maintenance of effort obligation, in accordance with the 2008 settlement agreement reached with the School Committee.
This dispute was initially submitted by the School Committee to the Commissioner of Education. The Commissioner, after hearing from both sides, in a decision dated August 31, 2009, concluded "the force of maintenance of effort cannot be evaded by having the town or city directly pay for a school expenditure, rather than appropriating the money into the school account as required by law, so that the school committee itself could pay for the expenditure and thereby establish lawfully required maintenance of effort level for the community" in succeeding fiscal years. The Commissioner further found that the "effect of the settlement of the 2008 Caruolo action was that the $1.162 million direct payment to vendors would not be used to establish a new maintenance of effort level for town appropriations to the school committee."
G.L. § 16-39-1 grants the Commissioner of Education the authority to hear and determine matters of dispute arising under any law relating to schools or education.
As to the effect of the settlement agreement on the relative positions of the parties, the Commissioner observed "that in Rhode Island contracts cannot run contrary to state statute and no contractual rights are created by such an agreement." For this proposition, she cited to Power v. City of Providence, 582 A.2d 895 (R.I. 1990) and Kells v. Town of Lincoln, 874 A.2d 204 (R.I. 2005). She further added that "contract terms that are contrary to public policy are not enforceable." Gorman v. St. Raphael Academy, 853 A.2d 28 (R.I. 2004). The Commissioner stated that the nature of the mutual resolutions reflecting the agreement demonstrated that the parties "willfully and knowingly adopted an agreement which contains terms that run directly contrary to the maintenance of effort law", (G.L § 16-7-23) and, that the agreement, "directly undermines the statutory structure created by the General Assembly to govern school finance in Rhode Island". Thus such agreement runs contrary to the statutory requirement that the town treasurer is to be "the custodian of both state and local appropriations for the public schools and that all monies appropriated by a town or city in support of public schools must be placed in a separate account". (G.L. § 16-9-1).
The Commissioner specifically found that the monies appropriated to directly pay the three vendors in this case were expenditures made in support of the public schools of West Warwick, and by not depositing said amounts in a separate school account would run contrary to G.L. § 16-9-1. The Commissioner expressed concern that by using the "expedient" of the town or city paying certain vendors directly, the entire statutory school funding mechanism established by the General Assembly would be destroyed. In conclusion, the Commissioner found no evidence on the part of either the Town Council or the School Committee of bad faith or improper motives. The Commissioner did not express an opinion as to whether the specific sums paid to vendors had to be appropriated by the Town to the School Committee in the following fiscal year to comply with maintenance of effort, leaving the quantification to be determined by the Superior Court in a mandamus action per G.L. § 16-7-23.
The Town appealed the Commissioner's decision to the Board of Regents in accordance with G.L. § 16-39-3. The Board of Regents affirmed the Commissioner's ruling according to its statutory authority. The Town thereafter petitioned the Rhode Island Supreme Court for certiorari, which was denied, thus leaving the Commissioner's decision as adopted by the Board of Regents as a final decision enforceable by way of mandamus or any other suitable civil action in the Superior Court. G.L. § 16-39-3.1.
II
Jurisdiction
The Town, in its Motion to Dismiss, argues that this Court lacks subject matter jurisdiction to grant the relief requested by the School Committee, taking the position that only by way of a decision that finds a shortfall in funding under the Caruolo Act may the Superior Court order the Town to appropriate additional funds to the School Committee for the operation of the public schools. The Town, in essence, states that the exclusive mechanism for this Court to order that a municipality increase its appropriation for public education is upon a finding that the funds appropriated for schools are insufficient to defray the cost of compliance with the basic education plan per the Caruolo Act. (G.L. § 16-2-21.4). The Town contends that this Court has no jurisdiction to order the School Committee to appropriate additional funds for fiscal year 2009 by way of mandamus under § 16-7-23 and that as a result of the settlement between the Town and the School Committee, the Caruolo Act claim for fiscal year 2008 was resolved and dismissed in
PC-2008-2836.
This Court believes it has proper jurisdiction to enforce maintenance of effort by way of a petition for issuance of a writ of mandamus. Rhode Island General Law specifically provides that "the courts of this state shall enforce this section by writ of mandamus." See G.L. § 16 -7-23. In addition, the Superior Court is the proper forum within which to petition for declaratory judgment.
G.L. § 9-30-1 provides: "The Superior Court....upon petition....shall have power to declare rights, status, and other legal relations whether or not further relief is or could be claimed." See also G.L. § 9-30-2, "Any person interested under a deed, will, written contract, or other writings constituting a contract, or whose rights, status, or other legal relations are affected by a statute....may have determined any question of construction or validity arising under the instrument, statute, ordinance, contract, or franchise and obtain a declaration of rights, status, or other legal relations thereunder."
This action, is clearly not one brought per Caruolo Act, but rather, this Amended Complaint alleges that the Town's appropriations for 2009 and thereafter do not comply with maintenance of effort per G.L. § 16-7-23. The Town's argument regarding the exclusivity of the Caruolo Act, as the sole means for challenging an inadequate local appropriation, ignores the many other statutory provisions which govern local funding for public education. See G.L. § 16-7-25, which sets forth the requirement that the School Committee must ensure adequate levels of funding in order to meet the minimum requirements set forth in G.L. §§ 16-7-15 to 16-7-34. See also School Committee for the City of Cranston v. Andrews, 984 A.2d 629 (R.I. 2000), wherein the Supreme Court affirmed the finding of the trial justice in that the Caruolo Act was not a standalone provision for educational funding, and stated, "all relevant statutes should be construed to harmonize with each other, to give full force and effect to the intention of the legislature." 984 A.2d at 643. Accordingly, this Court can resolve these issues by way of a petition for declaratory relief, as well as by a petition for issuance of a writ of mandamus.
This Court has jurisdiction to resolve a dispute between the School Committee and the Town as to whether the Town's appropriation met its maintenance of effort obligation even absent an alleged inadequacy of that appropriation under the Caruolo Act. The Court finds that the two minimum funding requirements are separate and disjunctive. The Court has further jurisdiction, should it choose to exercise it, to consider by way of writ of mandamus, whether an order should enter requiring the Town to appropriate additional funding as is necessary to ensure that the appropriation for any fiscal year is not less than the local appropriation for the previous fiscal year to achieve maintenance of effort.
Since the Town's appropriation for fiscal year 2009 was $28,829,138 or $1,162,343 less than the actual 2008 appropriation when considered to include the direct vendor payments made by the Town, the School Committee has properly invoked the jurisdiction of this Court, in seeking by way of declaratory relief, an order of this Court as to whether the Town's appropriation for that year complied with the maintenance of effort obligations of state law, and ordering by way of mandamus that the Town must deliver $1,162,343 to make up the shortfall for the fiscal year 2009 contribution. This Court has jurisdiction to hear and determine the issues raised by the School Committee in the Amended Complaint. Accordingly, this Court must deny the Town's Motion to Dismiss.
Although this Court is not obligated to follow a final decision of the Commissioner with respect to a school dispute submitted to her for review, the Court finds the reasoning contained therein to be persuasive. The Commissioner has been granted the authority by the General Assembly to hear and resolve disputes arising under any law relating to schools or education. In this case, before invoking the jurisdiction of this Court, the School Committee initially brought this controversy over maintenance of effort to the Commissioner as a dispute involving education and school laws. This Court has broader jurisdiction including consideration of the impacts of contract and statutory law with respect to the enforcement of a settlement agreement between the parties and whether an agreement in derogation of state law is enforceable.
III
Analysis
The Commissioner properly determined that, while she had jurisdiction to hear disputes over education law, she lacks general jurisdiction to resolve disputes over the effect of a judicial settlement, or to order that the Town appropriate additional funds to the School Committee by way of mandamus. The Commissioner thus deferred to the jurisdiction of this Court on those matters.
On the merits of the educational funding dispute, the Court believes the analysis by the Commissioner as to education law is persuasive and consistent with the spirit of local funding requirements. This Court, in giving some deference to the Commissioner's interpretation of education law, will generally follow her analysis. The Court must weigh in its analysis, not only the intent of state law with respect to educational funding, but also the public policy of enforcing judicial settlement agreements made in connection with settlement of civil litigation.
Settlements of litigation ordinarily should be encouraged by way of judicial enforcement. The agreement in this case, at least in part, requires the parties to ignore state legislation designed to promote statewide uniformity in the manner by which local municipalities are required to fund public education. Under these circumstances, the settlement must be balanced against considerations of legislative intent regarding local funding of public education. As has already been noted, this settlement agreement was never reduced to writing, nor was it made or assented to by the parties in the presence of the Court. Under these circumstances, the Rhode Island Superior Court Rules of Practice state that such an agreement will be considered of no validity. R.I. Super. Ct. R. Prac. 1.4.
Furthermore, the Commissioner determined, and this Court agrees, that the settlement is unenforceable as it violates both statutory provisions for local funding of public education as generally applicable to all municipalities in this state to ensure minimum, predictable, and level funding to support public education. See Power v. City of Providence, 582 A.2d 895 (R.I. 1990); Kells v. Town of Lincoln, 874 A.2d 204 (R.I. 2005). Generally, the courts are sensitive to enforcing settlement agreements in civil litigation, as such enforcement provides settlement incentive to parties contemplating settlements of civil matters pending in the courts of this state, and parties should expect that settlements reached in resolving lawsuits will be honored and enforced. This is especially true if the parties acted in reliance on such settlement, and on the assumption that it was valid and enforceable. This Court can infer from the undisputed facts that the Town relied on the School Committee's agreement in paying an additional $1.6 million directly to creditors of the School Committee. When, however, the settlement runs contrary to state law, the policy of enforcing settlements must yield to the proposition that agreements contrary to state law and public policy are not enforceable. This Court must further respect the Rhode Island Constitution, which speaks to the importance of public education, in that it provides:
"The diffusion of knowledge as well as virtue among the people, being essential to the preservation of the rights and liberties, it shall be the duty of the General Assembly to promote public schools..., and to adopt all means which may be necessary and proper to secure to the people the advantages and opportunities of education..." R.I. Const. art. XII § 1. See also, G.L. § 16-7-15.
"The purpose of §§ 16-7-15 to 16-7-34 is to provide a quality education for all Rhode Island youth by requiring a minimum per pupil expenditure level, by encouraging school committees to provide superior education beyond this minimum, by identifying fiscal responsibilities of school committees, by further improving the efficiency of our school systems through encouraging small school districts to combine into larger, more efficient regionalized units, and by incorporating the many various state aids into one comprehensive program." G.L. § 16-7-15.
This Court must consider such constitutional and legislative priorities in its attempt to balance the sanctity of settlement agreements, against respect for the General Assembly's constitutional obligation to promulgate legislation necessary and proper to secure adequate local financial support for public education. The concept of level local funding, which has become known in Rhode Island as "maintenance of effort," must be considered as part of a comprehensive and inter-related compendium of laws relating to financial support for public education, and this Court should not, and will not, enforce an agreement that runs contrary thereto. Since municipalities in Rhode Island must appropriate each year, an amount not less than what was appropriated in the previous year, it seems only logical that if a municipality has decided to directly pay creditors of the School Committee, that to exclude those direct payments from the calculation of the previous year's appropriation (even absent an agreement to do so) would permit a town or city to skirt its obligation under state law by artificially minimizing its previous year's appropriation, through such direct payments. If the Town could ensure a discount for future financial support obligations, a significant component of the legislature's statutory scheme for school financing would be effectively eliminated. This Court therefore concurs in the Commissioner's decision and will enter declaratory judgment as follows:
Such judgment shall declare that for the reasons stated herein, the alleged agreement between the Town of West Warwick and the School Committee of West Warwick as reflected in mutual resolutions made in December 2008, and referred to in the resolutions of the parties is void and unenforceable. In accordance with G.L. § 16-7-23, the parties must consider $29,991,481 to be the local annual appropriation for fiscal year 2008.
IV
Mandamus
As stated earlier in this decision, the Court believes it has proper jurisdiction to determine this controversy both by way of declaratory judgment and through the issuance of a writ of mandamus. See Randall v. Weatherell, 2 R.I. 120 (1852) (wherein the court affirmed an order of mandamus to compel the payment of certain obligations of the North Providence School Committee, which by law the Town was required to pay). Because of the Court's determination that the fiscal year 2009 appropriation was deficient in the amount of $1,162,343, to satisfy the maintenance of effort obligation for 2009, the mandamus relief sought by the Plaintiff School Committee is an order requiring the Town to appropriate that amount immediately and to pay such sum into the School Department's account. Although the Court has determined that there was a shortfall in the appropriation for 2009, this Court is reluctant to enter the mandamus order as requested by the School Committee at this time
In the Town of West Warwick, as well as in every municipality in this State, the budget cycle is an annual event. Each fiscal year the municipality must consider the proposed budget of the School Department and appropriation to be made to the School Committee and balancing the needs and required funding for schools against other municipal spending options and obligations. The type of mandamus order envisioned by the School Committee would be inconsistent with the annual budgetary process of the Town. It would, therefore, be inappropriate for this Court to order an additional school appropriation in 2012, to rectify an appropriation deficiency in 2009. The General Assembly has recognized the importance of the annual budget cycle in school matters, by expressly requiring: "In no event shall any court order obtained by the School Committee have force and effect for any period longer than the fiscal year for which the litigation is brought." G.L. § 16-2-21.4(b).
This is especially true in the Town of West Warwick that considers annual priorities and appropriations, as well as revenues to cover such appropriations, through a financial town meeting.
It would be unwise, if not contrary to the local funding protocol established by the General Assembly, for this Court to enter an order, the effect of which, is to modify the 2009 budget process, some three years after that process was completed. A complement to any appropriation must be a taxing decision with respect to raising revenue sufficient to meet the appropriations of the Town to its various departments and agencies. It would be impossible at this point for the Town to reconsider its local tax program, and individual tax obligations to accommodate any additional appropriation ordered by this Court. Complicating any order of mandamus, is the fact that for fiscal years 2010 and 2011, the General Assembly amended the maintenance of effort statute to allow a municipality to be in compliance for those years as long as the appropriation is not less than ninety-five percent (95%) of the appropriation for fiscal year 2009. G.L. § 16-7-23, as amended by P.L. 2010 ch. 124, see Furtado, et al. and Members of the Warwick School Committee v. Avedisian, et al. and Members of the City Council, City of Warwick, 2011 WL 6330312 (R.I. Super. 2011).
This issue is of sufficient importance to the students and taxpayers of West Warwick, that any order of mandamus, the effect of which, would be to order the Town to appropriate more money now to meet its fiscal year 2009 maintenance of effort obligation and must be the subject of additional briefing and further hearing to assist the Court in fashioning a fair and appropriate judgment.
V
Conclusion
Accordingly, at this time, the Court will enter an order granting the School Committee's Motion for Summary Judgment as to declaratory relief with respect to fiscal year 2009, but will not enter any further order or judgment with respect to mandamus relief until the Court receives from the parties additional legal memoranda addressing the Court's concerns in that regard. The parties shall meet and confer with the Court as soon as practicable to establish a schedule for additional briefing and hearings.
As a final thought, the Court believes that in many of these school funding disputes, the parties fail to understand that they are not the real parties in interest. It is the students and taxpayers of the Town who are the parties directly effected by the outcome of this type of litigation. The Court fails to see how the annual "tug of war" between school committees and municipal government best serves the constituencies that the parties represent. In fact as the Commissioner stated in her decision, "It is unfortunate that our present funding mechanism for attaining a mutually shared goal is an adversarial one which attempts to use litigation—usually an expensive and time consuming process in and of itself—as a budgeting and cost control mechanism. Other means for adjusting funding issues must be explored."